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How The New Tariffs May Affect The Fastener Industry

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Tariffs are a way of regulating trade. Any time you want to discourage the importation of foreign goods, making them more expensive is an easy method of disincentivizing it. Since many foreign countries are vital trade partners relied on by many United States-based manufacturers, it's important to understand exactly how these new tariffs may affect not only the importation of parts and materials but the global market in general. Without careful planning, original equipment manufacturers may find themselves feeling the pinch. 

How Tariffs Affect the Market

It's hard to find an industry that is entirely reliant on domestic materials, labor, and marketplaces, so trade barriers like tariffs can have far-reaching effects. In some cases, they may impact every portion of the supply chain. For example, under new tariffs, importing raw materials from some foreign countries would become much more expensive and increase costs down the line. 

Many foreign countries are a significant source of parts and raw materials for a wide array of American-made goods. Unfortunately, because of their ability to provide labor-intensive parts and materials at a low cost, it often doesn't make economic sense for manufacturers in the United States to find another source—even a domestic one. There is much discussion about these tariffs potentially escalating over time, from 5% to a possible 25%. This could have the effect of essentially shutting several industries down until they are able to set up an alternate source for parts and materials on relatively short notice. 

The Impact of Retaliatory Tariffs

One of the risks of imposing new tariffs on a foreign trade partner is that they may choose to strike back. Should these foreign trade partners decide to institute their own new tariffs on goods produced in the United States, it would make American goods less attractive to their local market. This shrinks the demand for American-made items by effectively eliminating their ability to compete based on price. This is of particular concern because many nations are exploring their options when it comes to fighting back against these tariffs, and there's a significant chance that they may choose to go this route.

Original equipment manufacturers that rely on the fastener industry have legitimate fears that new tariffs will make their products less competitive on the global market. If retaliation becomes a factor, not only will prices be driven up by the increased cost of fasteners and raw materials originating in other countries, manufacturers may suffer the loss of one of their key markets. 

The Potential Upside for the Fastener Industry

All of that aside, there's no real hard-and-fast rule for how imposing new tariffs ultimately influence the market, including the fastener industry. While there is a chance that many industries will find themselves having to adjust to less-than-favorable conditions, others might benefit from the changes. Just because foreign tariffs might make things more complicated doesn't necessarily mean they're all bad news.

As an example, these changes in the market will force some industries to tighten up their supply chains and create contingency plans for ensuring a steady flow of parts and materials. Some experts are even of the opinion that tariffs may offer a big boost to certain industries. Encouraging the consumption of more domestically-produced goods creates more jobs in the industries that supply those goods—mining and steel refining, for example—and increases the demand for equipment and improved infrastructure. Manufacturing plants that supply the parts and equipment for these sectors may see a significant boost in their bottom lines, tariffs notwithstanding. In the end, these tariffs may only be bad news for industries that are unwilling or unable to adapt to the change in market. 

While there is no way to know for certain how the new tariffs will impact our business and the fastener industry at large, we have taken the necessary steps to make sure that we're ready for any eventuality. Tower Fasteners understands our customers' concerns, and we have been working tirelessly to comprehend and prepare for the potential effects of these trade burdens. Armed with multiple domestic manufacturers and a robust international supply base spanning several countries, we hope to minimize the effects of these tariffs on our valued clientele.